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Is there an Equitable Exception to Reduction for Forgery?

Document Cited authorities 14 Cited in Related
Published date01 May 2015
Pages273-280
Date01 May 2015
AuthorDaniel J Carr
DOI10.3366/elr.2015.0281
<p>Few situations are more likely simultaneously to breed rancour and suspend candour than a family dispute, especially when a sizeable sum of money is involved. An unfortunate recent case in the Outer House, <italic>McAuley v Chalmers</italic>,<xref ref-type="fn" rid="fn1"><sup>1</sup> </xref><fn id="fn1"><label>1</label> <p><a href="https://vlex.co.uk/vid/therese-margaret-mcauley-or-878397009">[2014] CSOH 161</a>.</p> </fn> placed the Lord Ordinary (Boyd) in the unenviable position of having to make a decision against such a backdrop, and there must be sympathy for his Lordship's comment that it was “very difficult to tease out conclusions from this cobweb of conflicting evidence.”<xref ref-type="fn" rid="fn2"><sup>2</sup> </xref><fn id="fn2"><label>2</label> <p>Para 69.</p> </fn> Unfortunately, it is in such cases that the mischief behind the old maxim that hard cases make bad law can be afoot, and courts and commentators must be alert to the need to explain clearly the basis of such decisions.</p> McAULEY v CHALMERS Facts

The pursuer, Theresa McAuley (TA), had been in a long marriage to Paul Chalmers (PC), the father of the defender, Chris Chalmers (CC). The dispute concerned the ownership of a flat in Glasgow (“Hotspur Street”). CC was the owner of Hotspur Street at the time of the action. His title was derived from a disposition dated 16 March 2006, and registered in the Land Register on 9 April 2008. The disposition appeared to be signed by the pursuer, but in fact her signature had been forged.3

The defender conceded that the signature had been forged: see paras 43 and 70.

The action was, therefore, one where a mother sought reduction of a forged disposition which had effected a transfer to her son. All these matters were agreed facts, but the factual nexus was to become more complex and hazy

TA's ownership of the flat had a remarkable beginning. It was purchased in 1998,4

McAuley at para 12. It is unclear from the opinion whether the disposition was recorded in the General Register of Sasines (henceforth “GRS”) or registered in the Land Register, but if “purchased in 1998” means ownership was acquired by TA that year, it is likely that registration was in the Land Register as the Land Register was operational for the Barony and Regality of Glasgow from 30 September 1985: see Land Registration (Scotland) Act 1979 (Commencement No 4) Order 1985, SI 2005/501, para 2. This point has a deeper significance: if the GRS was involved there is a strong argument that TA was never the owner due to the requirement that a transferee must have formed an intention to become the owner by virtue of the transfer. It is not clear how that could happen in the absence of knowledge of the transfer. Matters would be different if the disposition was registered in the Land Register due to the curative effect of s 3(1)(a) of the Land Registration (Scotland) Act 1979. If TA benefitted from s 3(1)(a) it is difficult to reconcile this fact with the comment (at para 88) that TA “had no interest in the property before her signature was forged” unless “interest” here is meant in a non-technical sense.

the transaction being handled by solicitors who, it seems, corresponded only with PC. Nevertheless, the title was taken in the name of TA. No plausible explanation for this was given in court5

McAuley at para 13.

 though the Lord Ordinary hinted that evading taxation might explain matters.6

Para 81.

 Moreover, the court found in fact that TA was unaware that Hotspur Street had been purchased at all until 2012 when her own solicitor, instructed as part of proceedings to divorce PC, discovered that it had been registered in her name7

Para 30.

 and, furthermore, that it was now owned by CC as a result of the impugned transfer effected by the forged disposition.8

Paras 27–29.

 CC's knowledge of the circumstances surrounding the process of transferring Hotspur Street to him between 2006 and 2008 was ambiguous, though the Court doubted if CC knew of the forgery.9

Para 47.

 However, PC and CC's suggestion that a family discussion had taken place with a view to “setting up” CC with a house was rejected insofar as such a discussion had included TA, and what seems to have occurred was a “deliberate attempt by [PC] to keep his wife in the dark about the transfer of the property to [CC]”.10

Para 44.

So who forged the disposition? The answer to that question was not comprehensively determined. PC was asked if he had forged his wife's signature, but the Lord Ordinary explained that he was not obliged to answer a question if to do so would incriminate him in the commission of a crime.11

Para 11. See below at n 46.

In the event PC confirmed that he had signed as the witness,12

Para 42.

 but could not recollect if he had forged the deed.13

Paras 11 and 42.

 The Lord Ordinary found that answer to be unconvincing and did not believe PC.14

Para 11.

 However, it was conceded that forgery had occurred15

See above at n 3.

 and the identity of the forger was not material to the present action between TA and CC.16

It having been determined that CC himself had not forged the document.

A further complication was the fact that TA and PC had been sole partners in a firm, Rentier Property (“Rentier”), which owned and rented out properties, though PC substantially ran the firm.17

McAuley at para 3.

The firm was dissolved in accordance with the minute of agreement entered into by TA and PC on their divorce in 2012. The accountant who prepared Rentier's accounts gave evidence that she was unaware of Hotspur Street and that it was not included in accounts Rentier submitted to Her Majesty's Revenue and Customs.18

Paras 31–37.

 This omission was found to be a deliberate decision on the part of PC,19

Para 37.

 and rental payments had been paid in relation to the flat after ownership was transferred to CC but before he moved into the flat.20

Paras 57–60.

Finally...

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